Marginal: Charm School

“It is the OEM personnel who have the day-to-day responsibility of working with suppliers that are the primary determinants of the overall supplier relations.” That’s John Henke, president of Planning Perspectives, Inc., (www.ppi1.com; Birmingham, MI). PPI has been creasing what it calls the “Working Relations Index” (WRI) since 2002, which is based on information collected in a survey of suppliers to GM, Ford, Chrysler Group, Nissan, Honda, and Toyota.

“It is the OEM personnel who have the day-to-day responsibility of working with suppliers that are the primary determinants of the overall supplier relations.” That’s John Henke, president of Planning Perspectives, Inc., (www.ppi1.com; Birmingham, MI). PPI has been creasing what it calls the “Working Relations Index” (WRI) since 2002, which is based on information collected in a survey of suppliers to GM, Ford, Chrysler Group, Nissan, Honda, and Toyota. Consider what Henke is saying here. The people on the ground are the ones who have the greatest effect on how well an OEM does vis-à-vis relationships, trust, and other aspects that contribute to a good WRI. It almost seems as if those at the top are saying one thing to the public (e.g., “We have great relationships with our top suppliers!”), yet the message that gets to those internals who do the specifying and buying is entirely different. For example, the latest PPI study indicates that 60% of GM suppliers and 34% of Ford suppliers are “ambivalent,” at best, as regards doing business with those companies. And realize that the 2006 WRI shows that both GM and Ford have improved their WRI ranking as compared with ’05: GM up 14.9% to 131 and Ford up 10.8% to 174. (Yes, those two are at the bottom of the list. Toyota, at 407, and Honda, at 368, are at the top—but it should be noted that there is a measured decline in the year-to-year performance of those two, by -1.9% and -1.8%, respectively.) Given the dependence of the OEMs on their suppliers, this continued low (though improving) performance of the domestic Big Two is something that demands full-scale attention. Consider a specific purchasing area: Electrical & Electronics. Toyota is rated at 461, which is its highest-scoring purchasing area (and the highest score for any company). Electrical & Electronics happens to be Ford’s lowest-scoring purchasing area: 154 (but not the lowest score for any company; that goes to GM for Body In White, at 74). So if you are a person (realize that although companies are being rated, this is really about individuals who make up those companies) who works for a supplier company that provides Electrical & Electronics goods and services, what is the likelihood that you will provide your best to Ford rather than Toyota? Yes, you may still sell to Ford—after all, that is pretty fundamental to business—but your approach will probably be less than zealous. And in this competitive environment, success isn’t achievable via so-so solutions.

An analogy: I am writing this in an airport. The plane was supposed to have left a couple of hours ago. First, they said weather. Then a mechanical. Then back to weather. The airline customer service line was unhelpful, having seemingly less information that I was gleaning from the flight monitors. Some key metrics for the WRI—and for business interactions of any type—are trust and open, honest and timely information. None of which I was getting. Guess how I feel about the airline in this case. Guess how the understaffed airline gate agents feel about their lots and about their employer. What’s the fundamental difference between, say, the airline I’m booked on and Southwest, besides the latter not being in Chapter 11? People. Enthusiastic, engaged people. Southwest needs to keep an eye on its costs, as Toyota does. Those companies didn’t get prosperous by being profligate. Far from it. But they did it by paying attention to what matters, which is the way they treat their people and their customers.